Can pataday help with your dry eyes if caused by allergies? i heard that it helps with inflammation so you can produce/release tears better?

Pataday is for: seasonal allergies affecting the eyes not for dry eyes. It doesn't have anti-inflammatory effects, but more anti-histaminic effects that may secondarily reduce the allergic symptoms like inflammation, but it's not a steroid. So that doesn't directly have to do with producing or releasing tears better. You may be confusing lubricating tears for Pataday? Read: http://www.drugs.com/mtm/pataday.html

Yes: Pataday is commonly prescribed for allergic conjunctivitis. See your doctor for this medication and have a follow up if no better.

No: Use artificial tear for dry eyes. Theoretically, Pataday may dry up your eyes further.